Gold Prices Stem Earlier Losses, Settle Flat

NEW YORK ( TheStreet ) -- Gold prices took a hit Thursday as technical trading and a stronger U.S. dollar ruled the market.

Gold for April delivery closed down $3 to $1,362.50 an ounce at the Comex division of the New York Mercantile Exchange. The gold price has traded as high as $1,366.80 and as low as $1,351.40. The spot gold price was shedding $1.80, according to Kitco's gold index.

The U.S. dollar index was adding 0.76% to $78.23 while the euro slid 0.97% to $1.35 versus the dollar as investors turned their attention to Portuguese debt issues. The interest it is costing the country to borrow money for 10 years rose to 7.32% on Wednesday, which led the European Central Bank to buy more Portuguese debt.

Traders opted to take profits Thursday, booking gains after gold's 1.2% rally this week. Gold prices were up from session lows, however, as some investors bought gold on the dip. The stronger dollar also put pressure on the metal as the dollar-backed commodity became more expensive to buy in other currencies.

Investors were abandoning stocks and other metals as well in the midst of disappointing earnings from Cisco ( CSCO), which increased the allure of cash.

Weekly initial jobless claims also fell below the 400,000 level to 383,000. Federal Reserve chairman Ben Bernanke has said that a weak jobs picture is one of the factors supporting the need for low interest rates for an extended period of time. If the picture changes, many experts think the Fed could raise rates by the end of 2011, which would clip any gold rally.

Gold did manage to shrug off a rate hike from China earlier this week, but inflation in the U.S. is much lower than the emerging market. Counting food and energy costs, the rates are 4.6% versus 1.5%, respectively. Gold prices like negative real interest rates, the key interest rate minus the inflation rate, and any rate hike, even a modest one in the U.S., could dent this catalyst for gold.

While gold is trying to find its way out of its trading range and either to the next support level of $1,330 or resistance level of $1,380 an ounce, other precious metals are attracting investors.

"In terms of our holdings, we are very much seeing more of a holding pattern with ETFS Securities Physical Gold ( SGOL)," says Daniel Wills, senior analyst at ETF Securities. The most popular gold ETF, SPDR Gold Shares ( GLD - Get Report), shed only 2 tons in the last week as buying stopped and selling slowed.

"The other risk assets are very much still in play," says Wills who has seen strong inflows into their ETFS Physical Platinum ( PPLT - Get Report) and ETFS Physical Palladium ( PALL - Get Report). Platinum added 14,899 ounces in February while palladium added almost 20,000.

Platinum lost $2.50 to $1,859.40 an ounce while palladium ended down $12 to $826.45 an ounce. These two metals are so "geared to the auto sector cycle," explains Wills "and this has been a particularly strong point in the emerging market growth story."

Silver prices shed 18 cents to $30.09. The metal has been moving more with gold this week rather than industrial metals, despite the fact that it is used in construction and manufacturing. The metal settled over the $30 level for three consecutive trading days. Many experts are looking a $30.50 as the target, the one silver must take out before confirming an up move.

Gold mining stocks, a risky but profitable way to buy gold, were losing ground. Goldcorp ( AUY) was down 1.11% at $42.61 while Harmony Gold ( HMY) was losing 1.92% at $10.75. Goldcorp recently announced that its proven and probable gold reserves rose 23% to 60.1 million ounces in 2010.

Other gold stocks Gold Fields ( GFI) and New Gold ( NGD - Get Report) were trading at $15.92 and $9.25, respectively.